Long-term care refers to the ongoing services and support needed by people who have chronic health conditions or disabilities. There are three levels of long-term care:
Long-term care is not just provided in nursing homes. In fact, a common type of long-term care is home-based care. Long-term care services may also be provided in a variety of other settings, such as assisted living facilities and adult day care centers.
Understandably, many people put off planning for long-term care. Although it’s hard to face the fact that health problems may someday result in a loss of independence, if you begin planning now, you may have more options open to you in the future.
The odds of needing long-term care are high:
The cost of long-term care is rising:
Currently, the average annual cost of a one-year nursing home stay is $80,000 and in many states the cost is much higher. In the future, long-term care is likely to be even more expensive. If costs rise at just 3 percent a year (a conservative estimate), in 20 years, a one-year nursing home stay will cost approximately $144,489.
Many people mistakenly believe that Medicare, the federal health insurance program for older Americans, will pay for long-term care. But Medicare provides only limited coverage for long-term care services, such as skilled nursing care or physical therapy. And although Medicare provides some home healthcare benefits, it doesn’t cover custodial care, the type of care older individuals most often need.
Medicaid, which is often confused with Medicare, is the joint federal-state program that approximately two-thirds of nursing home residents currently rely on to pay some of their long-term care expenses. But to qualify for Medicaid, you must have limited income and assets, and although Medicaid generally covers nursing home care, it provides only limited coverage for home healthcare in certain states.
The major advantage to using income, savings, investments and assets (such as your home) to pay for long-term care is that you have the most control over where and how you receive care. But because the cost of long-term care is high, you may have trouble affording extended care if you need it.
Like other types of insurance, long-term care insurance protects you against a specific financial risk — in this case, the chance that long-term care will cost more than you can afford. In exchange for your premium payments, the insurance company promises to cover part of your future long-term care costs. Long-term care insurance can help you preserve your assets and provide access to a range of care options. However, it can be expensive, so before you purchase a policy, make sure you can afford the premiums both now and in the future.
The cost of a long-term care policy depends primarily on your age (in general, the younger you are when you purchase a policy, the lower your premium will be), but it also depends on the benefits you choose. If you decide to purchase long-term care insurance, here are some of the key features to consider:
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